ASX Drops Most Since 2010 Amid $530 Million Capital Raising

June 14 (Bloomberg) -- ASX Ltd., the operator of
Australia’s main stock exchange, dropped the most in 2 1/2 years
amid a A$553 million ($530 million) capital raising to ensure
its clearing business complies with new regulations.

The exchange raised A$267 million selling shares to
institutional investors and intends to raise a further A$286
million from individual investors, the company said in a
statement today. Its stock fell 6.1 percent to A$33.15 at the
close in Sydney, the biggest decline since Oct. 26, 2010,
compared with the offer price of A$30 per share.

ASX Chief Executive Officer Elmer Funke Kupper is expanding
the exchange’s over-the-counter clearing service for interest-rate swaps and has cut fees to fend off competition in stock
trading from Chi-X Australia Pty and dark-pool operators. The
company will use the funds to pay down A$250 million of debt and
will use A$200 million to comply with stricter rules expected to
be required for its clearing business.

“Risk to equity holders’ returns has increased,” said
Arvid Streimann, a Sydney-based analyst at Morgan Stanley, in a
report yesterday. “The catalyst for the capital raising was
greater clarity on the likely capital requirements from European
regulators.”

The Group of 20 nations has ordered a global overhaul of
rules governing derivatives contracts, mandating the use of
central-clearing parties by traders. Regulators have sought
tougher rules for over-the-counter derivatives since the
collapse of Lehman Brothers Holdings Inc. and the rescue of
American International Group Inc., two of the largest traders of
credit-default swaps.

Clearing Houses

Clearinghouses stand between buyers and sellers to reduce
the risk of default. Derivatives comprise 32 percent of ASX
sales, the largest component, and the exchange must apply by
mid-September to the European Securities and Markets Authority
to be able to continue servicing European-based clearing
participants.

“ASX expects that its clearing houses will be sufficiently
capitalized to satisfy reasonably foreseeable market growth and
regulatory outcomes,” according to a statement from the Sydney-based company June 11. This “positions ASX for growth in both
over-the-counter clearing and futures clearing against an
emerging international regulatory agenda.”

The retail offer is scheduled to begin June 17 and close at
5 p.m. in Sydney on July 5, ASX said in a statement today. ASX
will announce full-year earnings on Aug. 22.